Market action is mixed on Thursday morning as traders digest the recent big rebound and await the September jobs report on Friday and the CPI report next Tuesday.
Weekly jobless claims were higher than expected, prompting a positive reaction as it is seen as anti-inflationary and likely to push the Fed to pivot sooner rather than later. The early bounce is now sold, and the indices are at day lows and with rapidly falling magnitude.
With the market in a downtrend, I maintained extremely high cash levels and avoided trying to call market lows like many others like to do. My approach is to follow the stocks I like but not buy them in size until there is better price action. I’m not concerned about buying low. I am concerned about buying when I think there will be a sustained uptrend.
At this point, I want to maintain a stock buy list and establish a few small positions so that they get my attention. Charts don’t matter too much right now, but when market conditions improve, I’ll focus on the names that show the best development.
Here are some of the names on my current shopping list:
1. Uber (UBER) had an excellent second quarter. It widened higher on the news and was in a wide trading range. Revenues doubled and the company said it was working hard on margins, cash flow and growth. I expect another strong report on November 1st.
2. The beauty and health company (SKIN) provides skin care products and services through estheticians. The company announced that its revenue increased by 56% in its last quarter and also announced a major buyout program. Over the past month, five analysts have repeated their buys on the stock, and the average target price is $23, with a high target of $31 from DA Davidson.
3. Magnachip semiconductor (MX) is a Korea-based semiconductor manufacturer that is well under the radar. This is a value play because the company is profitable and holds cash of $6 per share in cash and has a book value of $10, but sells for around $11. It is currently estimated to earn $0.76 in 2023 and has been a rumored buyout target.
4. Aehr test systems (AEHR) produces test equipment that is used for a variety of purposes, but it has recently experienced very strong growth due to its focus on test chips used in electric vehicles. It experienced extremely strong growth and announced numerous contracts. It has earnings on Thursday night which will cause a move, but currently EPS is estimated to rise to $1.04 in 2024.
5. LianBio (LIAN) is a small biotech with a unique model. LIAN is more than 50% owned by biotech powerhouse Perceptive Advisors, which took the company public and strengthened its position at a higher price. Its most recent purchase was 120,000 shares at $2.63 on May 25, 2022. The LIAN model is to partner with companies that gain US approval for various drugs and then bring those drugs to China and on other Asian markets. The company already has several drugs in the works and is awaiting approval in China.
I am in no rush to buy these stocks at this time, but will be watching them closely and adding them when and if the price action and charts start to improve.
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